OREGON: Medicare to Give HMOs a 10% Boost
Although Medicare is planning to raise payments to Oregon's Medicare HMOs by 10% next year, managed care providers are questioning if the increase will be enough to offset "unpredictable cost factors [such] as new patient-protection regulations and the looming threat of medical inflation" the Portland Oregonian reports. Many industry officials anticipate that the increase will not lead to better member benefits, such as prescription coverage, as the increase will be just enough to offset an estimated 8% to 10% rise in medical cost inflation next year. Most health plans are trying to avoid raising premiums in 2000, but Kaiser Permanente's Denise Honzel says one of the "big drivers will be drug costs, which are inflating about 15% to 20% per year."
The increase, which bumps the fixed monthly Medicare payment per patient from $396.70 up to $435.99, applies only to Medicare HMOs, in which 40% -- 182,000 -- Medicare-eligible Oregon residents participate, not traditional fee-for-service Medicare. The reason is that HCFA is trying to encourage health plans to "go after the Medicare population -- especially in largely rural states such as Oregon," as part of a larger effort to "fix the drastic differences" in Medicare reimbursement from state to state. But the disparities will remain pronounced in some cases -- HMOs in Los Angeles and Florida's Dade County, for example, will receive monthly per member payments of $660.63 and $794.02, respectively. According to Jack Friedman, executive director of Providence Health Plans, the discrepancy is "all about more-efficient practice patterns." Based on the formulation Medicare uses to derive state funding, Oregon's more-efficient medical practice means it spends less on care and gets "stuck with the worst payment rates." Health plan officials are skeptical that the increases will help some of the sparsely populated counties in the state. Kaiser's Honzel says "I think plans will either pass those costs on to consumers, or in some areas, they may need to think about getting out ot those counties" (Rojas-Burke, 8/17).